First: A reality check on Mexico<\/p>\n
Mexico is in a unique position to reap many of the benefits of the decline of the
\nUS economy. In order to not violate NAFTA and other agreements the U.S.A.
\ncannot use direct protectionism, so it is content to allow the media to play this
\nprotectionist role. The U.S. media – over the last year – has portrayed Mexico
\nas being on the brink of economic collapse and civil war. The Mexican people
\nare either beheaded, kidnapped, poor, corrupt, or narco-traffickers. The
\nAmerican news media was particularly aggressive in the weeks leading up to
\nspring break. The main reason for this is money. During that two-week
\nperiod, over 120,000 young American citizens poured into Mexico and left
\nbehind hundreds of millions of dollars.<\/p>\n
Let’s look at the reality of the massive drug and corruption problem,
\nkidnappings, murders and money. The U.S. Secretary of State Clinton was
\nclear in her honest assessment of the problem. “Our insatiable demand for
\nillegal drugs fuels the drug trade. Our inability to prevent the weapons from
\nbeing illegally smuggled across the border to arm these criminals causes the
\ndeaths of police officers, soldiers and civilians,” Clinton said. The other large
\nillegal business that is smuggled into the U.S.A. that no one likes to talk about
\nis Human Traffic for prostitution. This “business” is globally now competing
\nwith drugs in terms of profits.<\/p>\n
It is critical to understand, however that the horrific violence in Mexico is over
\n95% confined to the three transshipping cities for these two businesses,
\nJuarez, Tijuana and Nogales. The Mexican government is so serious about
\nfighting this, that they have committed over 30,000 soldiers to these borders
\ntowns. There was a thoughtful article written by a professor at the University
\nof Juarez. He was reminded of the Prohibition years in the U.S.A. and
\ncompared Juarez to Chicago when Al Capone was conducting his reign of
\nterror capped off with The Saint Valentine’s Day Massacre. During these
\nyears, just like Juarez today, 99% of the citizens went about their daily lives
\nand attended classes, went to the movies, restaurants, and parks.<\/p>\n
Is there corruption in Mexico? YES !!! Is there an equal amount of corruption
\nrelated to this business in the U.S.A.? YES !!!. When you have a pair of illegal
\nbusinesses that generate over $300,000,000,000 in sales you will find massive
\ncorruption. Make no mistake about the Mexican Drug Cartel;
\nthese “businessmen” are 100 times more sophisticated than the bumbling
\nbootleggers during Prohibition. They form profitable alliances all over the
\nU.S.A. They do cost benefit analysis of their business much better than the US
\nautomobile industry. They have found over the years that the cost of bribing
\nU.S. and Mexican Border Guards and the transportation costs of moving
\nmarijuana from Sinaloa to California have cut significantly into profits. That is
\nwhy over the past 5-7 years they have been growing marijuana in State and
\nFederal Parks and BLM land all across America. From a business standpoint,
\nthis is a tremendous cost savings on several levels. Let’s look at California as
\nan example as one of the largest consumers. When you have $14.2 billion of
\nMarijuana grown and consumed in one state, there is savings on
\ntransportation, less loss of product due to confiscation and an overall reduction
\ncost of bribery with law enforcement and parks service people. Another great
\nsavings is the benefit to their employees. The penalties in Mexico for growing
\nrange from 5-15 years. The penalties in California, on average are 18 months,
\nand out in 8 months. The same economic principles are now being applied to
\nthe methamphetamine factories.<\/p>\n
FOX News continues to scare people with its focus on kidnapping. There are
\nkidnappings in Mexico. The concentration of kidnappings has been in Mexico
\nCity, among the very rich and the three aforementioned border Cities. With
\nthe exception of Mexico City, the number one city for kidnappings among
\nNAFTA countries is Phoenix, Arizona with over 359 in 2008. The Phoenix Police
\nestimate that twice that number of kidnappings goes unreported, because like
\nMexico 99% of these crimes were directly related to drug and human traffic.
\nPhoenix, unfortunately, is geographically profitable transshipping location.
\nMexicans, just like 99% of U.S. Citizens during prohibition, go about their daily
\nlives all over the country. They get up, go to school or work and live their
\nlives untouched by the border town violence.<\/p>\n
These same protectionist news sources have misled the public as to the real
\ndanger from the swine flu in Mexico and temporary devastated the tourism
\nbusiness. As of May 27 2009 there have been 87 deaths in Mexico from the
\nswine flu. During those same five months there have been 36 murdered
\nschool children in Chicago. By their logic, if 87 deaths from the swine flu in
\nMexico warrants canceling flights and cruise ships to Mexico, then close all
\nroads and highways in the USA because of record 43,359 automobile related
\ndeaths in the USA in 2008.<\/p>\n
What is just getting underway is what many are calling the “Largest southern
\nmigration to Mexico of people and real estate assets since the Civil War” A
\nsignificant percentage of the Baby Boomers have been doing the research and
\nare making the life changing decision to move out of the U.S.A. The number
\none retirement destination in the world is Mexico. There are already over
\n2,000,000 US and Canadian property owners in Mexico. The most
\nconservative number of American and Canadian Baby Boomers who are on
\ntheir way to owning property in Mexico for full or part time living in the next
\n15 years is over 6,000,000. Do the math on 6,000,000 people buying a
\n$300,000 house or condo and you will understand why the U.S. Government is
\ntrying to tax this massive shift of money to Mexico through H.R. 3056. The
\nU.S. government calls this “The Tax Collection Responsibility Act of 2007”.
\nThose who will have to pay it are calling this the EXIT TAX.<\/p>\n
Mexico: A better economic choice than China<\/p>\n
Another large exodus from the U.S.A is high paying skilled jobs. The job shift
\nin automobile sector, both car and parts manufacturing, is already known by
\nmost investors. In the last few months as John Deere and Caterpillar have
\nbeen laying off thousands of workers in the U.S.A., and hiring equal numbers
\nin Mexico. The most recent industry that is making the shift is the aerospace
\nmanufacturers. In the city of Zacatecas there is currently a $210 million
\naerospace facility being built. With the 11 U.S. companies moving there, it is
\nestimated to provide over 200,000 new high paying jobs in the coming years.
\nOne of the main factors for the shift in job south to Mexico instead of China is
\nrealistic analysis of total production, labor and delivery costs. While the labor
\ncosts in China are 40% less on average, the overall transportation costs and
\ninherent risks of a long distance supply chain, and quality control issues, gives
\nMexico a distinct financial advantage.<\/p>\n
Mexico’s real economic future<\/p>\n
Mexico has avoided completely the subprime problem that has devastated the
\nU.S. banking industry. The Mexican banks are healthy and profitable. Mexico
\nhas a growing and very healthy middle and upper middle class. The very
\nrecent introduction of residential financing has Mexico in a unique position of
\nhaving over 90% of current homeowners owning their house outright. U.S.
\nbanks are competing for the Mexican, Canadian and American cross border
\nloan business. It is and will continue to be a very safe and very profitable
\nbusiness. These same banks that were loaning in a reckless manner have
\nlearned their lesson and are loaning here the old fashioned way. They require
\na minimum of a 680 credit score, 30% down payment, and verifiable income
\nthat can support the loan. In most areas of Mexico where Baby Boomers are
\nmoving to, with the exception of Puerto Penasco (which did not have a
\nnational and international base of buyers), there is no real estate bubble.. The
\nhigher end markets ($2-20 million) in many of these destinations are going
\nthrough a modest correction. The Baby Boomers market here is between
\n$200,000 and $600,000. With the continuing demand inside the Bay of
\nBanderas, that price point, in the coming years, will disappear. This is the
\nreason the Mexican government is spending billions of dollars on more
\ninfrastructure north along the coast all the way up to Mazatlan.<\/p>\n
The other major area where America has become overpriced is in the field of
\nhealth care. This massive shift of revenues is estimated to add 5-7% to
\nMexico’s GDP. The name for this “business” is Medical Tourism. The two
\nbiggest competitors for Mexico were Thailand and India. Thailand and India’s
\nbiggest drawback is geography. Also recent events, Thailand’s inability to
\nkeep a government in place and the recent terrorist attack in Mumbai, have
\nhelped Mexico capture close to half of this growth industry. In Mexico today
\nthere are over 56 world class hospitals being built to keep up with this
\nbusiness.<\/p>\n
Mexico is currently sitting on a cash surplus and an almost balanced budget.
\nMost Americans have never heard of Carlos Slim until he loaned the New York
\nTimes $250 million. After that it became clear to many investors around the
\nworld what Mexicans already knew: that Mexico had been able to avoid the
\nworst of the U.S. economic devastation. Mexico’s resilience is to be admired.
\nWhen the U.S. Federal Reserve granted a $30 billion loan to each of Mexico,
\nSingapore, South Korea, and Brazil, Mexico reinvested the money in Treasury
\nbonds in an account in New York City.<\/p>\n
According to oil traders, Mexico’s Pemex wisely as the price of oil shot to $147
\na barrel put in place an investment strategy that hinged on oil trading in the
\nrange of $38-$60 a barrel. Since the beginning of 2009 Mexico has been
\ncollecting revenues on hedged positions that give them $90-$110 per barrel
\ntoday. Mexico’s recent and under reported oil discovery in the Palaeo
\nChannels of Chicontepec has placed it third in the world for oil reserves, right
\nbehind Canada and Saudi Arabia.<\/p>\n
The following is a quote from Rosalind Wilson, President of the Canadian
\nChamber of Commerce on March 19, 2009. “The strength of the Mexican
\neconomic system makes the country a favorite destination for Canadian
\ninvestment”.<\/p>\n
OPPORTUNITIES: WHY PUERTO VALLARTA & THE RIVIERA NAYARIT<\/p>\n
The answer is simple and old fashioned: SUPPLY AND DEMAND.<\/p>\n
The area of Puerto Vallarta\/Riviera Nayarit inside the Bay of Banderas is an
\ninvestor’s dream. This area has the comprehensive infrastructure in place,
\nworld class hospitals and dental care, natural investment protection from the
\nSierra Madre Mountains, endless future water supply, low to nonexistent
\ncrime, international airport, and limited supply inside the Bay, first class
\nprivate bilingual schools and higher than average appreciation potential. Like
\nmany areas in Mexico there is large demand for full and part time retirement
\nliving and a lot of construction underway to meet this demand. Pre
\nconstruction of course is where the best bargains are available.<\/p>\n
I would offer a word of caution for investors in Mexico. Do not be seduced by
\nthe endless natural beauty that is everywhere, both inland in colonial towns
\nand along thousands of miles of beach. Apply conservative medium and long
\nterm investment strategies without emotion. The demand for full and part
\ntime living by American and Canadian Baby Boomers is evident throughout
\nthe country. The top two choice locations are ocean front, and ocean view.
\nThe third overall choice, which is less expensive, is inland in one of the many
\nbeautiful colonial towns or small cities.<\/p>\n
Mexico, with the world’s 13th largest GDP, is no longer a “Third World
\nCountry”, but rather a fast growing, economically secure state, as the most
\nrecent five-year history of its financial markets when compared to the U.S.A.’s
\nfinancial markets suggests.<\/p>\n
DOW JONES AVERAGES MAY 2004 10,200 – MAY 2009 8,200 20% LOSS IN 5
\nYEARS<\/p>\n
MEXICAN BOLSA MAY 2004 10,000 – MAY 2009 23,000 130% GAIN IN 5 YEARS<\/p>\n
Robert P. Miller, PhD<\/p>\n","protected":false},"excerpt":{"rendered":"